“The Committee note that National Financing Regulatory Authority (NFRA) has been set up as an oversight body having quasi-judicial authority including suo moto investigation powers in cases of professional misconduct by a Chartered Accountant/firm of Chartered Accountants, imposition of penalty thereof, debarring members of the Institute of Chartered Accountant of India (ICAI), if proved guilty, etc. The Committee further note that the constitution of NFRA is a result of the recommendation of the Standing Committee on Finance which examined the Companies Bill, 2009 and recommended that the scope of the National Advisory Committee on Accounting Standards (NACAS) as included in the Companies Act, 1956 should be expanded not only to set and oversee auditing and accounting standards, but also to monitor the quality of audit undertaken across the corporate sector. The Committee further observe that similar oversight bodies also exist in other countries, for example, Financial Services Authority (FSA) in United Kingdom and Public Company Accounting Oversight Board (PCAOB) in United States of America.

However, as issues relating to conflict of mandate with regard to disciplinary matters between the NFRA and the Act governing the Institute of Charted Accountants of India has been raised, the Committee desire that the Ministry may ensure that in the process of constituting NFRA, it does not create two parallel jurisdictions, governing the same issue. The Committee would like the NFRA to function as an oversight body without any jurisdictional conflict or overlap. This aspect may be addressed, when the rules governing NFRA are finalised by the Ministry.”